THERE HAS been a stampede to invest in gold over the past week from investors seeking the shelter of safe havens as share prices tumble around the world. The FTSE 100 index of leading companies has fallen more than 21% over the past five days, but the price of gold is up to more than $900 an ounce, from less than $840 at the start of the week.

So what's so special about gold? The price of the precious metal tends to hold up well during difficult financial times. Rozanna Wozniak, investment research manager at the World Gold Council, says: "Investors pile into gold during a crisis because it tends to hold its own when other investments are performing miserably. So it's a bit like an insurance policy for your portfolio. It's also particularly attractive at the moment because there is no credit or default risk when you buy gold."

People are certainly piling in. Investment surged 163% to 284 tonnes in the first quarter of 2008, according to figures from the World Gold Council. Last week, one dealer was forced to suspend temporarily sales of gold coins because the firm simply ran out. Tony Baird, managing director of Baird & Co, says: "We are taking over 1000 calls a day from people who are very worried about their money. They are emptying their bank accounts and pouring their cash into gold. The overwhelming demand has depleted our stock so we have been forced to stop selling coins, although we still have plenty of gold bars."

But if the price is so high, is now a good time to buy gold? Mick Gilligan, director of fund research at Killik & Co, sees the attraction. "The volatility of global markets reinforces the case for gold. In fact, I would have expected the price to have pushed through $1000 an ounce by now. There's a strong argument for investing up to 5% of your portfolio in gold during the current turbulent times."

The imbalance of supply and demand suggests that gold could be a good investment over the long term, too. The cost of extracting gold has increased rapidly over the past few years. At the same time, there have been only a small number of big gold discoveries by the mining industry. So supply is constrained.

But demand is rising. Jewellery accounts for about three quarters of global demand for gold and that market was worth $54bn in 2007, a third successive annual record. In tonnage terms, overall jewellery demand in 2007 was 5% higher than in 2006, according to the World Gold Council.

So how do you invest in gold? There are several ways to buy the precious metal, from traditional coins to more sophisticated exchange traded funds.

Coins and bars Investors can buy gold bullion coins, such as sovereigns and krugerrands, from specialist dealers. Sovereigns are exempt from capital gains tax.

Krugerrands aren't as attractive as sovereigns and don't possess the same historical interest, but they are more readily available. A half-ounce kruggerand currently costs about £283.

Baird & Co was selling a half-ounce gold bar for £290 last week, but gold bars can be more difficult to sell than coins if you decide to cash in your investment.

If you don't want to take your gold coins and bars home, a dealer will store them for an agreed fee.

Visit bullion dealers such as www.goldline.co.uk and www.taxfreegold.co.uk for more information.

Exchange traded funds If you don't want to buy a bar or coin, an exchange traded fund is a cheap and easy way to gain exposure to gold. ETFs aren't actually funds; they are shares that track the gold price and can be traded daily. And they have been doing a roaring trade. Hector McNeil of ETF Securities says: "About $93 million has poured in over the last six days, the biggest gain for 10 weeks, as investors continue to seek safe-haven assets."

There are three ETFs listed on the London Stock Exchange. Lyxor Gold Bullion Securities and ETFS Physical Gold invest directly in gold bullion. McNeil says: "An ETF that is physically backed by gold is about as safe as it gets. The gold is yours - every single bar. So it cannot be lent out or given away. In other words there is no credit risk." The annual management charge is 0.39% and there is a dealing fee of $90.

The third, ETFS Gold, tracks a commodities index and is a bit more risky. All the ETFs can be held within an Isa.

Visit www.exchangetradedgold.com or www.etfsecurities.com for more information.

Gold funds There are several funds that invest in gold, including Investec's Global Gold fund and the BlackRock Gold & General. But investors should be aware that the funds tend to buy shares in gold mining firms, so the prices can be volatile. Plus, you are exposed to the ups and downs of stock markets. Performance has suffered over the past year. Investec Global Gold, for example, is down more than 30% over the last 12 months.

Charges can also be high. Expect to pay an upfront fee of about 4.5%, plus an annual management charge of 1.5%. The funds can be held in an Isa.

For more information, visit an independent financial adviser.